Sinch Ab · OMXSTO:SINCH
Sinch Ab — Q3 2019 Earnings Presentation
27 slides from Sinch Ab's earnings presentation, Nov 8, 2019
Slide 1: Q3 2019 Investor Presentation
Q3 2019 Investor Presentation 8 November 2019 Oscar Werner CEO Roshan Saldanha CFO Thomas Heath Chief Strategy Officer & Head of Investor Relations
Slide 2: Sinch at a glance
SEK 4.6bn SEK 483m SEK 8.6bn 570+ 30+ revenue in the Adj. EBITDA in the Market Cap employees offices in 30+ countries past 12 months past 12 months 30 billion Publicly listed on Customer engagement through mobile technology engagements per year NASDAQ in Stockholm Scalable cloud communications Servi
Slide 3: Accelerating growth
Accelerating growth Sinch gross profit and Adj EBITDA (SEKm) 400 350 300 • Focus on gross profit and EBITDA since pass-through revenues vary 250 between geographies 200 • Track record of profitable growth 150 100 • 37% growth in gross profit and 55% growth in EBITDA in Q3 19 50 0 Q1 Q2 Q3 Q4 Q1 Q2 Q
Slide 4: Growth markets
Growth markets Messaging CPaaS Application-to-Person (A2P) messaging is used Communications Platform as a Service (CPaaS) across the world for ever-more use cases allows businesses to easily integrate messaging, voice and video services into their own applications • USD 17 bn market size (MobileSqua
Slide 5: Playbook for profitable growth
Playbook for profitable growth • Empower businesses to leverage rich and conversational messaging Software- • Increase our software value-add (CPaaS) in addition to our connectivity offering as-a-Service • Increase stickiness with maintained scalability • Ensure leading direct global connectivity wi
Slide 6: Strategic acquisitions
Strategic acquisitions Founded IPO One brand in Stockholm 2009 2014 2015 2016 2017 2018 2019 2008 Technology & Industry-leading Voice, video, Personalized video and Rich messaging Go To Market Billing rich media messaging tech platform technology verification Low code tools Scale and Germany, profit
Slide 7: Deal rationale – TWW
Deal rationale – TWW • Founded in 1996 • Today the 3rd largest SMS connectivity provider in Brazil TWW • 3 000 enterprise customers of varied sizes across all industries • Team of 37 people in São Paulo, Brazil • ”Scale and Profitability”-type acquisition to add scale, operator connections, and cust
Slide 8: Deal rationale – myElefant
Deal rationale – myElefant • Founded in 2010 • Cloud-based software platform for mobile engagement using rich, interactive messaging myElefant • Pioneer in the use of mobile landing pages with advanced, real-time analytics • Team of 41 people in Paris and Bordeaux • ”Technology and Go To Market”-typ
Slide 9: July – September 2019
July – September 2019 • Gross profit rising 37% to SEK 343.6 million (249.9) • Adjusted EBITDA rising 55% to SEK 147.6 million (95.4) • Adjusted EBIT excl. acquisition-related amortization of SEK 131.5 million (90.8) • Profit after tax of SEK 68.7 million (37.8) • Organic Gross Profit growth of 33%
Slide 10: Key growth drivers
Key growth drivers 1. 2. 3. Rising message Businesses shifting Growth from new and volumes with large from email to existing customers US tech companies mobile messaging in Voice and Video Growing both with new and existing customers 10
Slide 11: Four investment areas
Four investment areas Growth with Operational Sales and New existing customers efficiency marketing technology • Continuous • COGS efficiency • New brand & • Software for investment in • Internal automation strengthened lead advanced, platform scalability for improved generation interactive • Key ac
Slide 12: Continued growth in Messaging
Continued growth in Messaging Messaging (SEKm) 1,200 1,000 • Rising message volumes 800 • US tech companies continue to fuel growth 600 • Investments in next-generation 400 messaging 200 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2017 2018 2019 Revenue Gross Profit EBITDA 12 12
Slide 13: Rising message volumes
Rising message volumes Number of transactions per month (billions) 2.2 2.0 • Growth with existing customers, 1.8 new customers, new use cases 1.6 1.4 • 14% organic growth in transactions 1.2 • 30% organic growth in Gross Profit 1.0 0.8 0.6 0.4 0.2 0.0 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 10111
Slide 14: Gross profit per transaction
Gross profit per transaction OPEX/transaction & Gross profit/transaction (SEK) 0.050 0.04 0 • Gross profit is the primary bottom line driver 0.030 • GP/transaction rising due to 0.020 personalized video, currency tailwind and increased traffic to profitable markets 0.010 0.000 1 2 3 4 5 6 7 8 9 10 1
Slide 15: Stable margin development
Stable margin development Messaging EBITDA/gross profit 60% • Revenue and gross margin depend 50% on mix of terminating markets 40% • EBITDA/gross profit shows margin excluding mobile operator charges 30% • Increased opex investments to 20% capture growth are more than offset 10% by rising gross pro
Slide 16: Step change in Voice and Video
Step change in Voice and Video Voice and Video (SEKm) 80 70 • Growth fuelled by Number Masking and Verification 60 50 • Growth with existing customers and new customers causing step 40 change in gross profit and EBITDA 30 20 • Increasing OPEX to ensure quality as volumes ramp quickly 10 0 -10 Q1 Q2
Slide 17: Stable development in Operators
Stable development in Operators Operators (SEKm) 60 • Fluctuations in results as projects 50 are realized 40 • Stable underlying performance 30 • Investments in RCS-as-a-Service for mobile operators 20 • Increased internal cooperation to 10 support growth in Messaging segment 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 18: Q3 2019 Financials
CA Q3 2019 Financials
Slide 19: Income statement
Income statement Q3 Q3 SEK million 2019 2018 2018 R12M Net sales 1.216,4 979,3 3.986,6 4.646,2 • Non-recurring items of SEK 12.9 Cost of goods sold and services -872,9 -729,4 -2.978,2 -3.382,2 million in Q3 19 relate to the Gross profit 343,6 249,9 1.008,4 1.264,0 acquisitions of myElefant and TWW O
Slide 20: Accelerating Gross Profit growth
Accelerating Gross Profit growth Organic FX +33% +5% 400 SEKm 12 344 350 18 3 0 60 300 • 37% total Gross Profit growth 250 250 • 33% organic Gross Profit growth 200 • Big US tech companies and Voice 150 and video driving growth in the 100 quarter 50 • Positive SEK 12m FX effect also 0 affects Adj EB
Slide 21: Increasing our value-add in Messaging
Growth rates in local currencies in comparable units. Increasing our value-add in Messaging 14% 19% 30% growth growth growth Transactions Revenues Gross Profit • Gradual shift from wholesale • Higher value per transaction • Serving more demanding to direct enterprise customers with personalized vide
Slide 22: Headcount increase
Headcount increase 600 +24% 573 • Headcount increasing by around 542 496 30 employees per quarter 500 441 462 469 110 119 excluding M&A 412 412 420 91 392 69 77 400 366 53 61 62 61 • Near-term negative effect on 47 49 EBITDA before new initiatives 300 translate into higher revenues and 200 393 405 4
Slide 23: Reconciling Cash Flow with EBITDA
Reconciling Cash Flow with EBITDA Q3 Q3 SEK million 2019 2018 2018 R12M XXX Adjusted EBITDA 147,6 95,4 367,1 483,4 Non-recurring items in EBITDA -12,9 4,0 6,2 18,1 EBITDA 134,8 99,4 373,3 501,6 Change in provisions 6,4 -7,6 -9,4 10,3 Net financial items 6,4 -1,8 -16,5 -7,6 • Strong underlying cash g
Slide 24: Cash flow
Cash flow Q3 Q3 SEK million 2019 2018 2018 R12M Cash flow before changes in XXX working capital 144,0 69,3 223,6 385,5 • High growth drives increase in Changes in working capital -120,9 -116,0 81,0 -101,6 Cash flow from operating activities 23,1 -46,6 304,6 283,9 Net Working Capital Net investments
Slide 25: Financial targets
Financial targets Targets: • Adjusted EBITDA per share to grow 20% per year Adjusted EBITDA per share, rolling 12 months • Net debt < 2.5x adjusted EBITDA over time 10,0 9,0 8,0 Performance: 7,0 6,0 • Adjusted EBITDA per share grew 5,0 46% in Q3 19, measured on a rolling 4,0 12 month basis 3,0 2,0 •
Slide 26: Future growth
Future growth Strong pipeline with several US-based, global tech companies Larger field sales organisation and strengthened marketing Further growth in Voice and Video New client wins in Personalized Video TWW & myElefant Investment in rich media, conversational messaging, RCS and OTT chat apps to c
Slide 27: Thanks!
Thanks! Copyright© 2019 CLX Communications AB (publ). All rights reserved. NDA Confidential. 27